Unit 2: Forms of Business Organisations

Revision Worskheet 2

Q1 Dharvi started an export business in the form of a private company along with her uncles Mr.
Danush Kumar and Mr. Manush Kumar. Later on, she came to know that Mr. Manush Kumar
had forged the signatures of Mr. Danush Kumar on the Memorandum of Association. She now
fears that the Incorporation of the company will be considered invalid? In context ofthe above
case according to you, will the incorporation of company be considered invalid? Why or why
not? 2

Q2 Explain the two systems that govern membership in the family business? 2

Q3 Recently Rajat, a friend of Shrey, who is a partner in an audit firm ‗Shanker Enterprise‘ on
Shrey‘s request accompanies him to a business meeting with ‗Prabhu Enterprises‘ and
actively participates in the negotiation process for a business deal. Rajat gives the impression
that he is also a partner in ‗Shanker Enterprise‘. Later on, credit is extended to ‗Shanker
Enterprise‘ on the basis of these negotiations. In context of the above case Can legally binding
partnership arise where no formal partnership agreement is in effect? Explain with reference
to Rajat. 3

Q4 Mr. Lakshit Aggarwal owns an ancestral house in Shimla. On the advice of his friend he
converts it into a lodge with renovation. The revenue from the lodge helps to supplement his
income substantially. On his death the property (lodge) is inherited by his three sons in order
of their age namely, Lakshay, Luv and Lok who carry on with the business under the form of
Joint Hindu Family Business. In context of the above case: 3
(a) Who amongst the three brothers has the right to exercise control over the family business?
(b) Comment upon the liability of the three brothers.

Q5 A syndicate of a three persons namely, Akanksha, Ann and Devesh was formed to purchase
the Tech Solutions Company and to promote and register a company to which the Tech Solution
Company property was to be resold. At that time the Tech Solutions Company was in a bad
shape. The syndicate first bought the debentures of the Tech Solutions Company at a discount.
Then they brought the company for `44, 00,000.Out of this money, provided by them, the
debentures were repaid in full and a profit of `40,000 was made thereon. They promoted a new
U I company and sold Tech Solution Company to it for `54,00,000. The profit of `10,00,000 was
revealed in the, prospectus, but not the profit of `40,000. It was held that theprofit of `40,000
was a secret profit made by the syndicate as promoters of the company. 5

In context of the above case:

(A) ‘Promoters of a company enjoy a fiduciary position with the company, which they must
not misuse‘. Explain with reference to the above case.
(b) What course of action can the company take in the event of non-disclosure of any secret
profit made by the promoters?

Q6. Saikripa Private Ltd. was in the process of incorporation. The promoter of the company signed
an agreement for the purchase of ten computers for the company and payment was tobe made to the
 suppliers of the computers by the company after incorporation. The companywas incorporated and
the computers were used by it. Shortly after incorporation, the company went into liquidation and
the debt could not be paid by the company for the purchase of the computers. As a result, suppliers
sued the promoters of the company for the recovery of money. 5
In context of the above case:
(a) During the promotion of the company the promoters enter into certain contracts withthird parties
on behalf of the company as described above. What are these types of contract known as?
(b) Examine whether promoters can be held liable for payment in the above case.

Q7. Farhan and Farida after completing a bachelor degree course in mass communication and media
planning plan to promote two different advertising companies in Nagpur and Kanpur,
respectively. As promoter they have been advised to take steps to prepare certain legal
documents, which have to be submitted under the law, to the Registrar of Companies for
getting the company registered. 4
In context of the above case:
(a) Can they file an exactly same Memorandum of Association for the two proposed
companies? Why or why not?
(b) Is it necessary for every company to prepare separate Articles of Association? Why or
why not.